Agrees To Change Advertising Practices and Reimburse Customers

For Release

May 15, 2001

The Federal Trade Commission has reached a consent agreement with Juno Online Services, Inc. ("Juno"), a national Internet Service Provider ("ISP"), over charges that advertising for its "free" and fee-based dial-up Internet access services was deceptive, in violation of Federal law. According to the FTC, Juno engaged in several deceptive practices that made it unreasonably difficult for some consumers to cancel its so-called "free" trial period for its Premium Internet service, causing these consumers to be billed for service they no longer wanted. Other FTC allegations include the charge that Juno also failed to disclose adequately that some subscribers to its Internet services would incur long distance telephone charges while connecting to the Internet.

Juno has agreed to stop misrepresenting the cost of its Internet services, to clearly and conspicuously disclose the cancellation terms for these services, to provide adequate customer support to handle consumer requests to cancel, and make prominent disclosure of long distance telephone charges that some consumers may incur while using its Internet services. The proposed settlement also calls for Juno to reimburse certain former subscribers for long distance telephone charges they incurred to use its services.

"These so-called 'free' Internet access offers were anything but," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "Information about fees was hidden in the fine print. The relevant conditions of any offer should be disclosed clearly and conspicuously so that consumers can make their purchases based on the facts."

Juno, incorporated in Delaware and based in New York, advertises and promotes dial-up and broadband Internet services that enable consumers to get online. To acquire new subscribers, the FTC charges that Juno engaged in several deceptive practices in advertising its free and Premium Internet service, including supposedly "free" and "completely free" trial offers for its Premium service and certain rebate programs. The challenged advertisements appeared in major newspapers, television commercials, radio, direct mailings, as well as online banner ads and on the company's Web site.

According to the FTC complaint, Juno misrepresented that consumers who participated in its free trial offers for Premium Internet service would be able to cancel at any time before the free trial period ended and incur no charges if they were not satisfied. The FTC charges that many consumers waited long periods to reach a Juno customer support representative and were forced to abandon their attempts to cancel - incurring charges for Internet service that they did not want to purchase. The complaint also alleges that Juno failed to notify consumers of its policy to allow cancellations only through one telephone number, which it kept unpublished, compounding the difficulty consumers faced to cancel their service.

The FTC complaint alleges some advertisements for Juno's free trial periods touted, for example, 150 free hours of Premium Internet service, but did not disclose adequately that consumers only had one month to use these hours. Other advertisements represented that consumers had an entire month to use the service for free, which, the FTC charges, was not true for some consumers. While Juno started to run their free trial periods immediately, these consumers had to wait 10 to 14 days to receive software that enabled them to use Juno's Premium Internet service. According to the FTC complaint, many of these consumers - unaware that their free trial period had been shortened - continued to use the service and were billed before 30 days had passed.

The FTC complaint challenges as deceptive Juno's failure to disclose adequately that consumers located in some parts of the country do not have a local access number to connect to the Internet with its services and would incur long distance telephone charges while online. The complaint also alleges that Juno failed to disclose that access numbers it provided to consumers when they installed its software, including telephone numbers that it explicitly recommended for consumers to use, might actually be long distance telephone numbers. The FTC charges that in advertising its Free Internet service, Juno misrepresented that consumers who used the service would incur no costs.

In addition, Juno failed to disclose potential long distance telephone charges and applicable cancellation penalties in its advertising for certain rebate programs that required a one year subscription to its Premium Internet service, the FTC charged. The FTC complaint also alleges as deceptive Juno's failure to disclose to consumers who participated in these rebate programs that it automatically renewed their subscription to its Premium Internet service after the one year period ended. The FTC complaint also includes a count that Juno provided deceptive advertising materials to certain promotional partners.

Finally, the FTC challenges as deceptive Juno's practice of advertising its Premium Internet service at certain prices and requesting personal information from consumers who attempted to sign up for that service as advertised, when Juno never actually offered the service for these prices and only disseminated the ads to test market demand at the prices advertised.

Under the terms of the proposed consent agreement, Juno would be barred from engaging in similar acts and practices in the future. Future misrepresentations about the price or cost, cancellation terms and duration of free trial periods for electronic-mail, Internet and other online services are prohibited. The agreement also would ban Juno from falsely representing that Internet service is available for purchase when it is not. In addition, Juno would be prohibited from beginning a free trial period or billing cycle for any Internet service until the consumer is first able to use the service.

The proposed consent will require Juno to disclose clearly and conspicuously affirmative obligations that consumers have to cancel their Internet service. The settlement also will require that Juno prominently disclose its cancellation policies and procedures during registration, and at least make this information readily available on its Web site and through a toll-free telephone number. According to the consent agreement, Juno must at a minimum provide consumers a way to cancel their Internet service through a toll-free telephone number and electronic-mail. The proposed order also would mandate that Juno maintain adequate customer support to handle consumer requests to cancel and terminate their service by the next billing cycle. These proposed requirements are critical in ensuring that consumers know what to do to cancel their Internet service and are able to do so without unreasonable trouble and expense.

According to the consent agreement, if Juno makes a cost claim for Internet service advertised with another product or service, it must also clearly and conspicuously disclose cancellation penalties and possible long distance telephone charges. In advertising for its Internet service exclusively, the consent will require Juno to prominently disclose potential long distance telephone charges before consumers register for its service.

Under the terms of the agreement, certain subscribers are eligible to receive reimbursement for long distance telephone charges they incurred within the first two months of using Juno Internet service. The consent agreement will require Juno to send notification letters to each consumer who subscribed to its Internet service as part of a rebate program and to subscribers who cancelled their service and either identified the unavailability of a local access number as a reason or complained to Juno about incurring long distance telephone charges. Juno must distribute the notification letters within 30 days from the date the consent agreement becomes final.

And finally, according to the terms of the consent agreement, Juno will be barred from providing third parties the means and instrumentalities to violate any provision of the agreement, and will be required to send a summary and explanation of the consent order requirements and the consent order to certain retailers that have previously promoted its Internet services. Juno also will be prohibited from disclosing or using archived information collected as part of the deceptive dry test advertisements it disseminated. The proposed consent also includes standard record keeping provisions to allow the Commission to monitor compliance.

The Commission vote to accept the proposed consent settlement was 5-0. An announcement regarding the complaint and proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until June 14, 2001, after which the Commission will decide whether to make it final. Address comments to FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: The consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, the consent agreement, and an analysis of the agreement to aid public comment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.